Pip Calculator – Forex Profits Can Now Be Calculated Easily!
Those who are new to forex trading will have to learn a lot of technical terms and concepts, which are essential for navigating the dynamic and fast-moving currency market. Making the foundation strong would pave the stone for building a successful trading career in the long run. Hence, new traders must take their time to understand and learn about the basic concepts of trading. One of the first lessons for a newbie in the forex market would be the calculation of pips. But calculating the number and value of a pip for each and every trade would be a time-consuming task for anyone, whether they are a new or seasoned trader. But, using a pip value calculator, traders can quickly calculate pips they need to capture to make a certain amount of profit or to calculate the pips in a different currency.Thank you for reading this post, don't forget to subscribe!
Today, we will be talking about the key functions and working of a pip calculator forex, along with the concept of pips from a beginner’s perspective so that you can make the best possible use of this basic yet essential tool.
What is a Pip?
Before moving forward with the pip calculator and its functions, we need to be clear about the concept of pips and their relevance in forex trading. In simple terms, pips are used as a unit of measurement in the context of exchange rate fluctuations. Forex currency pairs are one of the most volatile trading instruments in the world, and tracking the price movements of these currency pairs is extremely important for finding the best trading opportunities. Measuring the exchange rate changes is a lot different than tracking the price fluctuations of any other asset class. So, the concept of pips was introduced to make things easier for forex traders.
One pip is the tiniest change that happens in the price of a currency pair, or in other words, it is the smallest fluctuation that can happen in the exchange rate of 2 currencies. For Japanese currency pairs, one pip is 0.01. But for all other currency pairs, one pip would be 0.0001. However, the pip value for a trade would change depending on the chosen currency pair and the trading account’s base currency, which is the currency that a trader uses to fund their account. If all this sounds confusing to you, then you should open a free demo account on MT4 or MT5 to get the first-hand experience of how trading actually works. Trade on a demo account and try to capture a few pips, then convert those into the pips in your base currency. This will help you determine how this all works. The trade size or position size chosen for a trade also affects the pip value.
How to Calculate Pips?
The general formula for pip calculation is pip/present market value * trade size in lots
With this formula, you can easily calculate the pip value for the trade that you are about to take. Pip calculations are a key component for planning your trades, as the number of pips by which the price moves at the end of a trade will decide the gains or losses of that particular trade. In fact, many traders calculate the end result of their trade as the number of pips that they gained or lost, and they even place take profit and stop loss levels by tracking pip movements. So, you need to pay a lot of attention to the calculation of pips while planning and executing your trades.
Difference Between Pip and Pipette
Pip and pipette are 2 forex terms often used interchangeably by traders. However, they aren’t the same, and one must know about the difference between them. Pip is actually the standard unit of measurement in forex, whereas pipette is a unit that is even smaller than pip. A pipette is actually 0.1 of a pip, and you will need 10 pipettes to call it a pip. When we take the decimal place of the pipette in a currency pair’s price, that would be 0.00001.
Pipette = 1/10 of one pip
Basics of Pip Calculator Forex Trading
Using a pip calculator forex traders can easily determine the pip value irrespective of their knowledge, skills and experience. Most forex trading platforms and brokers will provide a forex pip calculator as a free trading tool they can easily access online. The only thing you would need to use a pip calculator is an internet connection. Then, you need to enter the correct values into the calculator. This includes the account base currency, the currency pair chosen as a trading instrument, trade size in lots and the number of pips you want to calculate the value for. The pip calculator works using an algorithm, which makes the calculation more accurate and efficient as it is an automated process. You will instantly get accurate results in real time if you enter the correct information into the calculator.
Tips for Using the Pip Calculator Forex
- Find the Best Pip Calculator – You can find many free pip calculators online, but choosing the best one will make the entire process easier for you while trading. So, go for a simple, basic and user-friendly pip calculator that can give you accurate results every single time.
- Always Enter Correct Values – You should double-check the values you enter, as any small mistake will lead to deviation in results.
- Consider the Spread – Spread is actually the cost that you need to bear for placing a trade. This cost becomes relevant in pip calculation as the number of pips gained in a trade would be your profits, and the spread, being the cost of this trade, would have to be deducted from the profits. So, considering spreads would make it easier for you to assess the profitability of trade while doing pip calculations.
Advantages & Disadvantages of Pip Calculator Forex
- With the help of a pip calculator forex traders can do pip calculations with minimal effort, as the entire process is automated once you enter the required information.
- Pip calculators and their counterparts are all AI-based tools, and they can perform all calculations with greater speed, delivering instant results.
- Pip calculators make the trading process smoother as you don’t need to calculate the pip values every single time manually.
- Pip calculators are useful for planning your trades in a better way and will function as a key tool for making better trading decisions.
- Pip calculators can give inaccurate results if you accidentally enter the wrong data.
- Pip calculators do not consider the spreads or other costs of trading, making them an incomplete tool for determining the profits you could earn from a trade.
To sum it up, a Forex pip calculator is a perfect tool for calculating the pip value of a trade with the most precision. They are one of those tools that cannot be excluded from your trader’s toolkit and must be used for every trade you enter or plan to enter. These days, you can find hundreds of online trading calculators that can perform pip calculation functions with higher speed and accuracy. You just need to find the best one you can easily use as a part of the trading process. So, take your time to learn about pip calculations and use pip calculators as a key tool for making sound trading decisions.